Minneapolis's brave new riverfront will have parks, museums, and upscale condos. Who said subsidized housing was just for the poor?

For now, no one is contemplating what happens if the boom ends--if condo owners default, building managers go Chapter 11, taxes remain unpaid, and the city gets burned on its investment. Sound too bleak? It's only what already happened in the last recession, when retail property, office space, and the value of riverfront real estate went down the toilet.

DEVELOPING THE RIVERFRONT is costing a lot of money. In the central riverfront--roughly what you can see from the Stone Arch Bridge--the direct public investment totals $47 million. Chalk up another $34 million to city-backed bonds. Another $42 million in direct public subsidies is on the table, but not spent, for projects already under way. Grand total: $123 million in public dollars so far, from city, state, and federal sources.

Brian Barber

Back the camera up to include all of the downtown riverfront--say from 35W and Washington Avenue up to the warehouse district north of downtown. Now the numbers really soar: $136 million in direct public subsidies and another $99 million in city-backed bonds, bringing the grand total up to $358 million. The amount spent on actual public works (street paving, parks and bike trails along the river) consists of about $43 million--just 12 percent of the total. The remaining $315 million subsidized one corporate development or another.

But if those numbers sound large, the projects yet to come signal a new order of magnitude. Across the street from the twice-bankrupt Whitney Mill Quarter stand the North Star Woolen Mill and the General Mills Utility Building, where Brighton Development plans the most ambitious condo project thus far to take shape on the riverfront. The mill is a graying brick structure where once hundreds of teenage girls tended knitting machines for $6 a week. The General Mills building rises 11 stories and features huge windows overlooking the river. It is the birthplace of Betty Crocker and the former home of WCCO radio.

The land beneath the buildings, an old freight yard, is soaked with fuel oil. Inside, asbestos and lead paint are everywhere. Pipes are missing, floors moldy, windows broken, roofs leaky. "It was built so long ago," says Brighton's Lucas, "before there were building codes. Everything is atypical. Bringing them back to the standards of today will be tricky and expensive. Everything has to be done."

By the time everything is done, living here won't be cheap. Completed units will start at $120,000 and the most expensive will exceed $700,000 including customized features like floor tiles from Italy. In all, the project will cost about $30 million, or some $375,000 per unit.

Almost half of that total will be public money: If all goes as planned, Brighton's condos will be subsidized to the tune of $180,000 each. Until now, the average public subsidy for riverfront residential projects has been $83,000 per unit.

Meanwhile Brighton is contractually guaranteed a $3 million profit, plus 75 percent of any additional income. "This property has been on the market for years," one MCDA staffer says. "People haven't been pounding down our doors to develop it--unless we give them a lot of money."

Brighton is no stranger to the riverfront, or to asking the MCDA for money. They've worked on a half dozen high-profile properties in the district and many more around town since they first emerged from the "community-oriented development" scene of the 1970s. The firm's ties with the city are manifold.

One of the partners, Richard Brustad, once headed up the city's Housing and Redevelopment Authority, the MCDA's precursor. He is also chair of the Minneapolis Public Housing Authority. Brighton's lobbyist, former mayor Al Hofstede, is also a lobbyist for the city.

Peggy Lucas, another principal, is close to mayor Sharon Sayles Belton and sits on the Metropolitan Sports Facilities Commission. Her daughter, Amy Lucas, is a member of the city's Heritage Preservation Commission. "We like working in the city," Peggy Lucas says. "It would be unusual if we didn't know people in City Hall."

Nonetheless, accusations of favoritism and special treatment have followed Brighton around for some time now. One project, the Lourdes Square townhomes near Riverplace, was given the green light by the city in 1993 even though Brighton did not meet city guidelines for the site and MCDA staffers favored an alternative plan by another developer. The MCDA sold Brighton the $4.3 million property for $400,000; Lucas lives in one of the units.

"They're a juggernaut," says one developer who's been head to head with Brighton. "Dick Brustad owns this city. He's a very powerful man."

UNTIL RECENTLY, BRIGHTON'S business consisted largely of subsidized low- and moderate-income housing, such as the West Bank's Riverside Plaza. With the government tightening the spigot on such subsidies, the company has diversified into a more upscale market. But it has kept its ability to attract low-income housing funds: Most of the public subsidy to the Northstar project will come from federal programs designed to aid the poor. The current plan includes more than $600,000 in Community Development Block Grants and $5 million from the Department of Housing and Urban Development's "Section 108" loan fund.

Both programs, according to HUD documents, hold "the primary objective of benefiting low- and moderate-income persons." (They could use the help: Affordable housing has been disappearing in the Twin Cities at a rapid clip, and the rental market is one of the tightest in the nation.) But some of the funds may also be used to eliminate "slums or blight," or mitigate community problems that "present a serious and immediate threat to the health or welfare of the community." That, the logic goes, is what the Brighton condos will do.